Moody’s: 2020 budget OK to help economy

THE signing of this year’s P4.1-trillion national budget would help the Philippine economy grow to 6.2 percent, Moody’s Investors Service said on Thursday.

In a comment, the credit ratings agency said the 2020 budget, which is 12 percent higher than the P3.7-trillion appropriation in 2019, “will help sustain the Philippines’ rapid economic growth against an uncertain global backdrop, a credit positive.”

Part of that help, it added, would come from the budget’s implementation over the course of a full year, as compared to the delayed passage of last year’s outlay.

A dispute between the Senate and the House of Representatives over alleged insertions caused that delay, forcing the government to run on its 2018 budget.

Moody’s said that, because of that budget delay, government spending, excluding interest payments, contracted by 1.9 percent in the first half of 2019, compared with the year-earlier figure, and dragged economic growth.

“The large 27.2-percent contraction in real public construction in [the] second quarter [of] 2019 cut more than 1 percentage point from real GDP [gross domestic product] growth and was the largest contributor to the weakest growth since early 2015,” it explained.

This year, the credit rater expects the pace of state spending to normalize and, along with residual spending from the 2019 budget, to support a significantly larger fiscal expansion.

“We project the Philippines’ real GDP growth [to] accelerate to 6.2 percent this year from [an estimated] 5.8 percent in 2019, faster than most regional and rating peers, and bucking the trend of lackluster global economic growth,” Moody’s said.

The credit rating agency’s forecast, however, falls below the government’s target range of
6.5- and-7.5-percent GDP growth for 2020. Latest data show that GDP picked up to 6.2 percent in the third quarter of 2019 after the slower-than-expected 5.6-percent and 5.5-percent expansions in the first and the second, respectively.

The country’s economic managers have set a P4.16-trillion disbursement program this year.

“Despite our expectation of a significant pickup in budgeted spending and a consequently wider fiscal deficit, we project underlying strengthening in Philippine fiscal metrics because of ongoing structural increases in revenue from tax reform,” Moody’s said.

This year, the debt watcher emphasized, revenue will be enhanced by scheduled increases in excise taxes effective at the beginning of this year.

Government revenues are expected to hit P3.49 trillion this year, according to the program set by the Development Budget Coordination Committee.

Moody’s also expects government debt to remain stable and debt affordability to improve this year.

Latest data showed that government debt eased to P7.70 trillion in November.